By Katie Dehlinger DTN Farm Business Editor and By Elizabeth Williams DTN Special Correspondent

OMAHA (DTN) -- Cash flow is a growing problem in farm country, and nearly all of the bankers that spoke with DTN at a recent conference said there's some part of their portfolio that's under significant financial stress. However, that portion is small, and bankers say they're being more proactive in helping customers head off problems.

Moody Analytics director of sales management Doug Johnson started a presentation at the National Agricultural Bankers Conference with a number of quotes from ag lenders, the themes of which echoed through the workshops, coffee breaks and keynote sessions.

He said one lender told him: "The valley is as deep as it was in the 1980s, both financially and emotionally for some producers, but it's not as wide."

Another said: "We are one average yield away from disaster."

And a third said: "Kick the can down the road. A rolling loan never collects a loss," resulting in chuckles and shaking heads from the crowd.

In school, you get the lesson before you take the test, Johnson said. "If you've been around lending since the '70s or '80s, you got the test first, and then you got the lesson. And because of that, we know more today, arguably, than we ever knew going into the farm crisis of the 1980s."

Lenders say they're more proactive in working with troubled clients to refinance, restructure or rethink their operations to stay in business. They're preparing for a tough renewal season by taking a deep look at their customers' numbers to generate financial metrics that help take the emotion out of tough business conversations.

"We may see a few more necessitated sales in weather-stressed areas or operations without strong equity," said Mike Hein, vice president at Liberty Trust and Savings Bank in Durant, Iowa. "But for most borrowers, they are hanging on, especially those who took advantage of higher prices earlier in the year."

Others are seeing strong yields, which also help offset poor commodity prices.

Joe Kessie, senior vice president and regional manager of commercial banking at Lake City Bank in Warsaw, Indiana, said that, overall, balance sheets are strong and there are a lot of off-farm employment opportunities in his part of north-central Indiana.

"What's helping is a lot of operations had equity going into this tough period. And if we can help them by stretching out terms and reducing minimum payments, we'll do that."

Much of that equity is tied to farmers' largest asset, their land. Jason Henderson, associate dean of Purdue University's College of Agriculture and director of Purdue Extension, said he thinks a combination of slightly higher interest rates, uncertainty about yields after years of above-trendline production and lower commodity prices will probably result in a slight decline in land values.

"I don't think we're going to get a 1980s scenario, because I think there will be people there to provide a floor. We can look at the floor being provided by housing in some places. We can look at it provided by farmers in other places, and I think this is the big one: Is the top quartile of producers able to buy out the bottom quartile of producers? If they're able to do that, I think land values might soften, but they won't collapse."

In the 1980s, some potential buyers sat on the sidelines until prices hit rock bottom, but Henderson thinks more farmers have the financial capability to step in and buy this time around.

"The last bastion, the Rock of Gibraltar in agriculture finance, is our farmland," said David Kohl, professor emeritus of agricultural and applied economics at Virginia Tech. "As long as farmland holds, you're not going to have a lot of write-offs. If farmland starts cracking, that is when we're going to have some issues."

He suggests lenders do some shock testing on customers' balance sheets to see what would happen if farmland drops 10%, 20% or 30% to help them gain perspective of the strength or weakness of their balance sheet.

"Land values have made our producers complacent. I'll be very, very blunt. They'll say, 'Hey, I'll do the refi[nance] to bail our issues out,' instead of reinventing themselves," he said.

Iowa's Hein said lenders can only do so much refinancing.

"We've been fortunate that yields have been strong, and lenders have anticipated the financial stress, so we've restructured loans and refinanced before desperation struck. But we are getting to a point where the farm operation has to make cash flow. And that is very challenging at these prices," he said.

Kohl said there are plenty of farmers who hope for a repeat of the high incomes from the 2007 to 2012 super cycle, but that kind of spike in farm incomes has only happened three times since 1910.

"If your only strategy to get through these tough times is to hope for higher prices, you probably need to rethink your strategy," said Bradley Guse, senior vice president of agribusiness banking at BMO-Harris Bank in Marshfield, Wisconsin. "But tough times make better managers."

Nate Franzen, president of the agribusiness division at First Dakota National Bank in Yankton, South Dakota, said he is most concerned about clients that won't make adjustments to their operation expenses or family living costs.

"Those who will make it are those who make adjustments and embrace change. I was pleasantly surprised this year at the financial health of our borrowers. I am cautiously optimistic about next year, because most of our borrowers are making adjustments."

Patrick Dinan, vice president of lending with Community Savings Bank in Iowa, said paying attention to the details matters.

"If you can concentrate on decisions that affect the numbers to the right of the decimal point, the decisions affecting the numbers on the left of the decimal point will take care of themselves," he said. "The time to get farmers [who have lost money the past three years] out of production agriculture is when they still have some equity left. As a banker, I swing axes and I swing early. If you get out now, you still have your dignity. Self-worth is more important than net worth."